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<Results First Take> ST Engineering (STE SP) – 3Q21 in line with expectations

  • S$1.82bn worth of new contracts secured in 3Q21, led by new MRO and P2F orders in the commercial aerospace segment.
  • Orderbook hit a record high of S$18.2bn, up from S$16.8bn in 2Q21 and S$15.4bn in 4Q20.
  • Sustained improvement in commercial aerospace segment, with overall utilisation at 80% in 3Q21 vs 67% in 1H21
  • On-track to achieve S$180m of cost savings in FY21F.
  • Regulatory review for TransCore acquisition progressing as planned

More to follow after the analyst briefing in the morning.

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What’s new?

  • STE booked S$1.82bn of new orders in 3Q21, with S$1.03 from the Commercial Aerospace segment, S$0.4bn from the Urban Solutions and Satcom (USS) division, and S$0.4bn from the Defence & Public Security (DPS) segment.
  • New contracts in the aerospace segment primarily comprised of new MRO contracts with various airlines, and an order of 18 units of A320/321 P2F from a BBAM, an aircraft lessor.
  • Contracts announced for the USS segment includes smart city projects in Singapore, and the provision of Satcom ground infrastructure in the US.
  • Orderbook broke yet another record to reach S$18.2bn during the quarter, for an implied book-to-bill ratio of 2.5x. S$1.9bn of revenue to be recognised from the orderbook in 4Q21, which is higher than last year’s cadence.
  • Continued improvement in commercial aerospace segment, with revenue hitting S$607m in 3Q21, up 27.0% y-o-y and 3.9% q-o-q. Hangar utilisation rates were at 80% in 3Q21, vs 67% in 1H21 and >90% prior to the pandemic.
  • P2F slots are now fully booked through 2024-2025 after factoring in the substantial order from BBAM.
  • Regulatory reviews for TransCore acquisition are proceeding as planned – no change to the current timeline of completion in 1QFY22.
  • Earnings should be on track to hit our full-year FY21F projection, with STE on course to realise S$180m of cost savings for the year.